One of the stockmarket’s most exciting growth areas is Biotechnology, a sector which has been overlooked by many investors in recent years.
In this article, Sharesify explains why this is a great time for investors to buy into the biotech recovery story. We also place three of our favourite biotech funds under the microscope for further examination.
Why Biotech, why now?
Medical research is finding breakthroughs via multiple new technologies, just as ‘Big Pharma’ companies are desperate to replace drugs going off patent. Also, mergers and acquisitions are back big time and despite a recent rally biotech sector valuations continue to look attractive relative to history.
The sector is also benefitting from structural drivers. An ageing population needs more medical care, while scientific advances are leading to more treatments for common and rare diseases alike. In addition, growth investors are diversifying away from the expensive tech mega caps.
Ailsa Craig, co-manager of International Biotechnology Trust (IBT), tells Sharesify: ‘Biotech tends to perform well in fits and starts and then has a period of consolidation.
‘IBT benefitted from nine acquisitions in the 2025 calendar year and the whole sector had a boom in M&A. And we think that is going to continue.’
Craig adds: ‘We’ve got multi-billion dollars coming off patent and that drove a record year of M&A sector-wide. So we are looking forward with quite an optimistic lense.’
Geoffrey Hsu, manager of The Biotech Growth Trust (BIOG), also thinks the rally still has legs: ‘We’ve had a nice recovery in share prices recently after a protracted bear market in biotech. A lot of that has been driven by the fact small caps have started performing again.’
Hsu points out a lot of biotech companies are pre-revenue and don’t make profits yet. As such, investors have to use other metrics to value them. These include market cap relative to cash on the balance sheet.
‘Even after the recovery of the past year or so, we are still at historical lows from an absolute valuation standpoint,’ Hsu informs Sharesify.
‘Interest rate headwinds have disappeared for the most part, and M&A has been an ongoing driver of returns in the biotech industry.
‘Big pharma is facing loss of exclusivity on a lot of their blockbuster drugs. As a result, they need to acquire biotech companies in order to offset that future revenue shortfall.’
International Biotechnology Trust
Ticker: IBT
Share price: 842p
Discount to NAV: 5.5%
International Biotechnology Trust has proved the outstanding performer in the biotech space over three, five and 10 years. Share price and NAV total return have beaten the AIC Biotechnology & Healthcare sector on a decade-long view.
Managers Ailsa Craig and Marek Poszepczynski have been in charge for over five years. Their risk-conscious approach has delivered impressive alpha in rising and falling markets.
The £280 million cap trust is positioned in what the managers call ‘Biotech 2.0’. This refers to late-stage, clinically de-risked biotechs that could be the mid and large caps of tomorrow. That is, if pharma giants don’t acquire them first.
The fund has a bias to small caps and nine portfolio companies were acquired in 2025. Servier’s $2.5 billion acquisition of Day One Biopharmaceuticals (DAWN) marked the first takeover of 2026 for the trust.
As the table shows, the managers currently prefer to invest in companies treating rare diseases. This is a space where there is a huge unmet medical need for treatments and the companies boast better pricing power. But IBT also has allocations to oncology, metabolic, auto-immune and endocrinology.
Asset allocation by sector (as at 31 January 2026)
| Rare Diseases | 32.2% |
| Oncology | 13.7% |
| Metabolic | 12.5% |
| Auto-Immune | 7% |
| Endocrinology | 6.2% |
| Venture Funds | 6.1% |
| Cell Therapy | 4.9% |
| Pulmonary | 4.8% |
| CNS | 4.2% |
| Cardiology | 4.1% |
| Opthamology | 3% |
| Infectious Diseases | 1.1% |
| Other | 0.3% |
Source: International Biotechnology Trust factsheet
Top 10 positions include Soleno Therapeutics (SLNO), which has a drug to treat Prader-Willi syndrome in children. Another is Madrigal (MDGL), which is working on a drug for non-alcoholic fatty liver disease. Outside the top 10 sits Vera Therapeutics (VERA), which has a drug in development to treat kidney disease.
IBT trades at a 5.5% discount to NAV, which suggests there is still value on offer. It also pays a dividend from capital, equal to 4% of the previous year-end NAV.
Kepler Trust Intelligence describes the fund’s performance in the five years under Craig and Poszepczynski as ‘exceptional’. It views IBT as a ‘highly attractive way’ to allocate to biotech for the long term. ‘The risk-conscious approach has worked well in a tough period and should help dampen the high volatility in the sector while the return potential remains.’
The Biotech Growth Trust
Ticker: BIOG
Share price: £11.75
Discount to NAV: 8.9%
Though it has narrowed dramatically thanks to the sector rally, Sharesify views Biotech Growth’s 8.9% discount to NAV as an attractive entry point. The portfolio’s tilt towards small and mid caps (SMID) and focus on potential M&A targets leaves the fund well-placed to maximise the returns from the sector.
Prospective investors should understand that owing to its SMID bias, the portfolio tends to flourish in risk-on markets. It may underperform when investors hunker down in the relative safety of large caps.
The trust is managed by OrbiMed Capital’s Geoffrey Hsu and Josh Golomb. OrbiMed’s investments in pre-IPO businesses and a deep analyst team are competitive advantages in terms of picking the best ideas in a sector where binary outcomes are common.
Hsu and Golomb have leaned into small cap exposure as this is where they still see very low valuations. Biotech Growth should benefit from M&A as portfolio companies attract the attentions of Big Pharma, which needs to replace drugs rapidly going off patent in the next four years.
Another point of differentiation for Biotech Growth versus other funds in the space is its material China exposure. North America represents almost 85% of the portfolio, but Biotech Growth has a 5.2% allocation to China, now generating a steady stream of products.
Top 10 holdings (as at 28 February 2026)
| Amgen | 5.7% |
| C4 Therapeutics | 3.8% |
| Biogen | 3.8% |
| Regeneron | 3.7% |
| ORIC | 3.2% |
| Praxis Precision Medicine | 3.1% |
| Esperion Therapeutics | 3% |
| UroGen | 2.8% |
| Cybin | 2.7% |
| Gilead Sciences | 2.6% |
Source: The Biotech Growth Trust
Biotech Growth’s top 10 includes American pharma giant Amgen (AMGN), as well as Praxis Precision Medicines (PRAX). The latter is developing therapies for central nervous system (CNS) disorders. Outside the top 10, Biotech Growth Trust offers exposure to companies developing antibody-drug conjugants including ADC Therapeutics (ADCT) and Corbus Pharmaceuticals (CRBP).
Kepler Trust Intelligence says Biotech Growth Trust is ‘unabashedly return-seeking, with the tilt to small-caps and the use of gearing indicative of a strategy that seeks to find the best growth opportunities and accept some volatility along the way.’
RTW Biotech Opportunities
Ticker: RTW
Share price: $1.96
Discount to NAV: 13.3%
The trust is different to most biotech or healthcare funds in that it focuses purely on finding ‘transformative’ technologies. These can range from early-stage academic programs needing funding all the way to mature publicly-traded companies.
The portfolio NAV comprises around 78% exposure to public companies, 24% to private companies and 2% to royalty payments. Around 71% of the portfolio is invested in North America, 16% in Europe and 13% Rest of the World.
By disease area, the biggest weightings are 24% in neurology, 22% in oncology, 21% in immunology and 12% in metabolic. Most of the assets are either in commercial production or Phase 3 trials, with only 20% in Phase 1, Phase 2 or pre-clinical trials.
The trust has beaten the AIC Biotech & Healthcare Sector by a substantial margin in five out of seven years since listing in 2019. It only lagged the sector in 2024 (-4.6% against +1%) and 2021 (-12.8% against -2.3%).
Performance (as of 28 February 2026)
| NAV return | Share price return | AIC Sector | |
| 1 Year | 34.3% | 54.8% | 14.9% |
| 3 Years | 52.7% | 63.9% | 23.9% |
| 5 Years | 15.6% | -11.4% | 5.4% |
| Since inception | 131.4% | 101% | 27% |
Source: TRW Biotech Trust
This year biotech stocks have held up better than most markets as investors have rotated away from mega-cap tech. Capital market activity has been supportive, too, with 46 deals completed including six IPOs, most of which are trading higher.
The trust has already had major successes in 2026, starting with the IPO of portfolio company Aktis Oncology (AKTS). This was followed by the acquisition of another portfolio company Penumbra by Boston Scientific (BSX) at a 19% premium.
Next, GSK (GSK) announced it would buy RAPT, also an RTW portfolio company, for a 65% premium. Lastly, Corxel, the trust’s largest private holding, raised just under $300 million to finance Phase 2 drug trials.
Despite these successes, the trust’s shares were trading at a discount to NAV of over 13% at the end of February 2026. That is just above the average five-year discount of 17.3% but still well below 2022’s premium rating.
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